Rental Agreement and Housing Law: Expenses and Crucial Clauses for Tenants and Landlords
The new Housing Law has brought significant changes regarding the expenses and clauses that can be included in a residential lease agreement. These changes have a significant impact on both landlords and tenants. In this article, we will examine which expenses can be passed on to tenants and which clauses are valid under the new law.
Real Estate Management Fees
One of the highlights of the new Housing Law is the explicit exclusion of real estate management fees and contract formalization costs. This means that landlords can no longer charge tenants for these costs. This is good news for tenants as it reduces the additional expenses associated with renting a property.
Rent Arrears and Liability Insurance
Rent arrears and liability insurance are expenses that can be passed on to tenants, but only if they agree to include them in the contract. However, it is important to note that if tenants decide not to pay for these insurances in subsequent years, they may face legal issues. It is crucial that both parties are clear on these terms when signing the contract.
Duration of the Lease
The duration of the lease agreement can vary, but it is most commonly entered into for one year. Subsequently, through mandatory extensions, the contract can be extended up to five or seven years, depending on the type of landlord. Setting a minimum term of seven years can have significant implications for both the landlord and the tenant. Tenants must be willing to commit for the long term, and landlords cannot regain possession of the property before the agreed-upon initial period ends.
Rent updates according to the Consumer Price Index (CPI) or any other indexing index are limited by law. For the year 2023, the update is limited to 2%, and for 2024, it is 3%. Additionally, a new update index is expected to be created in 2025 to replace the CPI. Any clause that sets an increase based on the CPI will be null and void, as the variation can be both upward and downward, which could disadvantage tenants.
Expenses That Cannot Be Included
The new law prohibits real estate agencies from passing on certain expenses to tenants. These expenses include those related to real estate management, such as tenant search and mediation, as well as contract formalization costs, including fees for professionals like notaries and lawyers. These costs must be borne by the landlord.
Expenses That Can Be Included
The law does not limit the passing on of other expenses incurred after the contract is signed. This may include expenses related to the administration of rentals, as long as these services benefit the tenants. This could encompass services such as cleaning at the end of the lease, repairs, legal advice during the lease term, or other services that demonstrate a direct benefit to the tenants.
In summary, the new Housing Law establishes clear guidelines on the expenses and clauses that can be included in a rental agreement. Both landlords and tenants must understand these regulations and agree on the contract terms properly to avoid future conflicts. It is essential to seek legal or real estate expert advice to ensure that the contract complies with the law and meets the needs of both parties.
If you want to learn more, Jaume Domingo, founder and CEO of Living Sitges, provides a summary of the implications of the new 2023 Housing Law in the following video:
Article by Living Sitges Real Estate.